Full year results presentation. 22 May 2018

Transcription

1 Full year results presentation 22 May 2018

2 Operational highlights Fundraising and capital deployment at record levels 2 Total AUM up 20% to 28.7bn, with 7.8bn of new money raised Fundraising driven by our Senior Debt Partners strategy raising 4.2bn and growing momentum across our European capital markets strategies Third party fee earning AUM up 12% in the year to 21.0bn Strong deployment across strategies, up 21% to 4.9bn. Continued focus on investment discipline in a competitive market Portfolios continue to perform well with all funds on course to meet or exceed applicable hurdle rates Excellent start to the new financial year. Europe Fund VII fundraising is well advanced, with 2.6bn raised to date. With a target size of 4bn we are scaling this strategy to reflect the level of investment opportunities

3 Financial highlights Fund management profits up 29%; driving dividend growth 3 Fund Management Company profits up 29% to 95.3m (2017: 74.0m), with third party fee¹ income up 21% Investment Company profits¹ lower at 79.5m (2017: 163.5m), due to lower investment income Group profit before tax¹ of 174.8m (2017: 237.5m) Final ordinary dividend up 8% to 21.0 pence per share. Total ordinary dividends in the year up 11% to 30.0 pence per share Total ordinary dividends represent 110% of post tax FMC profits (2017: 128%); we are ahead of plan in covering ordinary dividends from FMC profits ¹These are non IFRS GAAP alternative performance measures and represent internally reported numbers excluding the impact of fair value movements on derivatives (FY18: 6.5m; FY17: 1.3m). Internally reported numbers exclude the impact of the consolidation of 14 credit funds following the adoption of IFRS 10

4 Strategic priorities 4 FY10 FY18 Strategic transition FY19 FY23 Recognised as the leading European specialist asset manager Enhanced brand and client base Developed new strategies to deliver gross fundraising target Developed a scalable infrastructure platform Established an in-house distribution platform Achieved greater capital efficiency Optimising co-investment ratio Increased FMC operating margin Increased fundraising target of three year rolling average 6.0bn per annum FMC becomes dominant profit contributor FMC operating margin to exceed 43% Selectively expand number of strategies, and optimise profit from existing strategies Optimise balance sheet to drive growth in the fund manager Maintain an efficient capital base Dividends linked to FMC profit

5 Financial Review 5

6 Financial highlights FMC profits exceed those of the IC for the first time 6 12 months to 12 months to m 31 March March 2017 Fund Third party fee income Management IC management fee Company Other income Operating costs (114.8) (105.7) FMC profit Investment Interest income Company Other income Net capital gains Impairments (25.2) (48.0) Net investment returns Interest expense (56.6) (53.9) Operating costs (86.2) (77.3) IC management fee (17.8) (18.1) IC profit Group Profit before tax Accounting standard IFRS 10 requires 14 credit funds to be consolidated into statutory results. All numbers in the financial review shown excluding the impact of IFRS 10 Assets and liabilities grossed up with minimal impact on shareholders funds ¹These are non IFRS GAAP alternative performance measures and represent internally reported numbers excluding the impact of fair value movements on derivatives (FY18: 6.5m; FY17: 1.3m). Internally reported numbers exclude the impact of the consolidation of 14 credit funds following the adoption of IFRS 10

7 Balance sheet and capital strategy Balance sheet flexibility supports growth 7 m 31 March March 2017 Assets Loans and investments 1,899 1,712 Assets for syndication Cash Other Total assets 2,527 2,501 Liabilities Borrowings 1,021 1,119 Other metrics Other Shareholders funds 1,318 1,173 Total liabilities 2,527 2,501 Gearing ratio 0.77x 0.95x Debt facilities 1,503 1,600 Available headroom Cash flows from operating activities (49) 710 Balance sheet portfolio higher following strong investment activity Balance sheet gearing to return to within the range of x with investment in new strategies Diversified sources and maturities of financing, healthy debt headroom

8 Fund Management Company 8

9 Third party assets under management Record third party AUM of 26.5bn up 22% in the year 9 FY18 AUM inflows/outflows by strategy bn Third party AUM up 4.7bn in the period; inflows 7.8bn; outflows 2.3bn and 0.8bn FX and other Realisations in Corporate Investments arising on the older European Mezzanine and Senior Debt Partners funds Fee earning AUM up 12%; will continue to grow as new money raised is invested FY19 fundraising focus on Corporate Investments successor funds and Capital Market strategies (1.0) (1.5) Corporate Investments (0.5) Capital Market Investments Inflow (0.2) (0.1) Real Asset Investments Outflow Secondary Investments AUM by Business Unit Fee earning AUM m 31 March March March 2018 AUM 31 March 2017 Corporate Investments 9,227 8,516 13,873 10,805 Capital Market Investments 7,682 6,171 7,683 6,171 Real Asset Investments 2,766 2,667 3,509 3,290 Secondary Investments 1,297 1,388 1,469 1,551 20,972 18,742 26,534 21,817

10 Fee income Fee rates maintained across asset classes 10 Weighted average fee rate¹ by strategy FY % 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Corporate Investments - Private Debt Corporate Investments - SDP Capital Market Investments Real Asset Investments Secondary Investments Group FY16 FY17 FY18 ¹ Weighted average fee rates based on average fee earning AUM during the year and excludes any performance fees and catch-up fees

11 Fee income Evolution of product mix marginally reduces average fee rates 11 Fee Earning AUM movement and fee rates by strategy Net movement in Fee Earning AUM ( m) 1,200 1,000 SDP Group 0.86% 800 Liquids / Loans US CLOs Weighted avg. fee rate % European CLOs Longbow Senior Debt Strategic Equity Asia Pac Longbow Partnership Capital Euro Mezz % 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% PEFI

12 FMC operating margin Operating margin above target 12 m 250 Operating m argin 50% Target FY14 FY15 FY16 FY17 FY18 Costs (lhs) Income (lhs) Operating margin (rhs) 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

13 FMC operating costs Costs in line with expectations months to % FMC 12 months to m 31 March 2018 revenue 31 March 2017 % FMC revenue Investment team staff costs % % Marketing staff costs 5.2 3% 4.6 3% Infrastructure staff costs 8.9 4% 8.7 5% Staff costs % % Cash incentives % % Deferred aw ards % % Incentive schemes % % Other non staff costs % % Placement fees 2.5 1% 3.0 2% Total % % Increase in staff costs reflects investment in capital market and senior debt strategies New remuneration policy has increased the weighting to cash incentives for infrastructure and junior team members

14 Investment Company 14

15 Net investment return Returns in line with long term trends; guidance 11-12% 15 Net investment return trend m 2,500 2,000 1,980 1,958 1,891 1,903 1,500 1, % 12.1% 13.7%* 12.6% FY15 FY16 FY17 FY18 Average Balance Sheet Portfolio (inc. AFS) Net Investment Return * Net Investment return in FY17 disclosed excluding realised gains recycled from AFS

16 Net investment return Balance sheet portfolio weighted to higher return strategies 16 Net investment return by fund m Net Investment Return % of total NIR FY18 NIR % Europe Fund VI % 28 % Europe Fund V % 20 % Strategic Secondaries II % 36 % ICAP III % 13 % North America Private Debt I % 16 % Other % N/A Total % N/A Other includes investments in the lower returning capital market and real estate asset classes This includes where the Group invests in order to meet regulatory requirements

17 Investment Company costs Costs in line with expectations months to *12 months to m 31 March March 2017 Staff costs Cash incentives Deferred aw ards Incentive schemes Amortisation Other non staff costs Total Business development costs Increase in business development costs reflects exploration into Asia Pacific energy strategy Deferred awards increase in line with expectation following strong year of realisations in 2017 Amortisation relates to the acquisition of the ICG Enterprise Trust management contract on 1 February 2016 * NI payable on Balance Sheet Carry of 2.2m has been presented in this presentation within deferred awards, as opposed to staff costs. The prior year has been restated on a consistent basis

18 FY19 guidance Performance fee guidance upgraded 18 Fundraising average 6bn per annum over 3 year rolling period; FY19 expected to exceed this FMC operating margin above 43% Performance fees to average 20-25m per annum Net investment return averaging 11.5% Balance sheet portfolio average c 2bn with co-investment ratio trending downwards Gearing to increase with investment in new strategies to within the range of x Tax rate low single digit effective tax rate Ordinary dividend representing % of post tax FMC profit

19 Operating Review 19

20 Our strategy To grow our specialist asset management activities 20 Invest selectively Grow assets under management Manage portfolios to maximise value Generate strong shareholder returns to invest in growth and pay sustainable dividends

21 Investing 21

22 Investment markets European private companies are growing strongly 22 Europe revenue and EBITDA growth 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% EBITDA Growth Rate Revenue Growth Rate ICG internal data is a competitive advantage, ICG index launched in April Source: ICG European Private Company Trends; April 2018

23 Investment markets Credit fundamentals are on a strong footing 23 Europe leverage and interest coverage 7.00x 6.50x 6.00x 5.50x 5.00x 4.50x 4.00x 3.50x 3.00x 2.50x 2.00x Net Senior Debt/EBITDA Net Sub Debt/EBITDA EBITDA/Net Cash Interest Source: ICG European Private Company Trends; April 2018

24 Investing our direct investment funds Capital deployment strong for all our larger strategies 24 Direct investment funds¹ m 5,000 4,500 4,000 3,500 3, , , Fund invested at 31 March % 100% North America I SDP II Longbow IV 3,000 1,064 80% Europe Fund VI Asia Pac III 2,500 60% Strategic Secondaries II 2,000 3,787 Japan 1,500 3,327 40% 1, ,424 20% SDP III 0 FY16 FY17 FY18 0% 0% 20% 40% 60% 80% 100% 120% Investment period Corporate Investments Real Asset Investments Secondary Investments ¹ Amounts invested include third party and balance sheet capital Size of bubble indicates third party AUM

25 Managing Investments 25

26 Fund performance Portfolio performance provides platform for future fundraising 26 Fund Target MM Realised MM ICG Europe Fund IV 2006 (fully realised March 2015) 1.5x 1.6x IRR on realised assets ICG Minority Partners Fund 2008 (fully realised January 2016) 1.9x 2.0x ICG Recovery Fund 2008 (fully realised March 2017) 2.0x 1.9x Longbow UK Real Estate Debt Investments II (fully realised April 2017) 1.4x 1.6x ICG Mezzanine Fund III x 1.9x ICG Europe Fund V 1.6x 1.8x Senior Debt Partners I n/a 1.2x Senior Debt Partners II n/a 1.2x Asia Pacific Mezzanine Fund I x 1.9x Asia Pacific Fund II x 1.9x Intermediate Capital Asia Pacific Fund III 1.7x 1.5x Nomura ICG Fund 1.3x 1.1x North America Private Debt Fund n/a 1.4x ICG-Longbow UK Real Estate Debt Investments III n/a 1.3x ICG-Longbow UK Real Estate Debt Investments IV n/a 1.2x 0% 10% 20% 30% 40% Performance hurdle Performance above hurdle

27 Fund performance Realising assets locks in investment returns and track record 27 Percentage of realised assets exceeding hurdle rate FY18 realised assets; performance against hurdle 100% 90% 98% 92% 95% 3 +20% above hurdle 80% 70% 70% 80% % above hurdle 60% 4 50% 5-10% above hurdle 40% 30% 20% % above hurdle 10% 0% FY14 FY15 FY16 FY17 FY18 1 Below hurdle

28 Fundraising 28

29 Fundraising Record fundraising year driven by Senior Debt Partners 29 bn Fundraising expectations c 6bn pa* Funds raised in FY18 by strategy ( m) Non US strategies 5.1bn ,053 Australian Senior Loans European CLOs Real Estate Funds 5 Credit Funds ,003 SDP - Europe sleeve Secondaries US Mezzanine 1 0 FY14 FY15 FY16 FY17 FY18 US strategies 2.7bn 716 1,222 US CLOs SDP - Non Europe sleeve * Average on a three year rolling basis

30 Fundraising Capital Markets Fundraising gathering pace reflecting recent investment 30 Funds raised over the last 5 years by strategy ( m) m 1,200 1, Investing in diversified portfolios capturing inherent inefficiencies in alternative credit. Targeting management fees of 150bps Multi-asset approach; senior secured loans, special situations, CLO debt / equity, high yield bonds. Targeting management fees of 45-75bps FY14 FY15 FY16 FY17 FY18 Liquids/Loans Total Credit Alternative Credit Strategy seeks to construct diversified portfolios, primarily investing in senior secured floating rate loans. Management fees of 40-60bps

31 Fundraising outlook Excellent start to FY19 and strong fundraising pipeline 31 FY 19 FY 20 Australian Senior Loans Corporate Investments Europe Fund VII North America Private Debt Fund II Asia Pacific Fund IV European Loans, High Yield & Multi-Asset Credit Capital Market Investments Global Loans & Structured Credit CLOs UK Real Estate Fund V Real Asset Investments UK Real Estate Senior Debt UK Real Estate Development Secondary Investments Strategic Equity Fund III Note : Arrows indicate changes in timing

32 Fundraising Europe Fund VII Market leading strategy upsized to meet investment demand 32 Fundraising history m 4,500 Co-invest ratio % 70% 4,000 3,500 3,000 2,500 60% 50% 40% 2,000 30% 1,500 1, ,420 1,750 2,006 2,500 2,627 20% 10% - ICG Mezzanine Fund 2003 ICG European Fund 2006 ICG Europe Fund V ICG Europe Fund VI ICG Europe Fund VII 0% Third party funds* Expected final close* Co-investment ratio * Third party funds raised for Europe Fund VII as at the date of announcement. Target size of 4bn

33 Fundraising Europe Fund VII Reduction in discounts increasing fee rates fund on fund 33 Europe Fund VI investment trajectory Fee rate progression Fund invested 1.45% 120% 100% Today 1.40% 1.40%+ 80% 31 March % 1.34% 60% 30 September % 40% 31 March % 1.25% 20% 30 September March September % 0% 0% 20% 40% 60% 80% 100% Investment period 1.15% Fund V Fund VI Fund VII Size of bubble indicates invested capital

34 Potential new strategies Substantial opportunity to expand in private markets 34 Real Estate Europe Euro Mezzanine Small Cap Fund of Funds Global Senior Debt Real Asset Sale & Leaseback Private Equity Solutions Asia Real Estate Private Rented Sector Secondaries Infrastructure Private Debt Latin America Real Estate Opportunities Fund North America Separate Account Real Estate Asia Corporate Special Situations Note: Strategies are indicative of potential growth opportunities only

35 Wrap Up 35

36 Wrap up Well positioned for further growth 36 Grow assets under management Record fundraising year, with 7.8bn raised Excellent start to new fundraising year with Europe Fund VII targeting record raise Invest selectively Larger strategies investing strongly Maintaining investment discipline in a competitive market Manage portfolios to maximise value Portfolios performing well Healthy environment for realisations, locking in investment returns and track record Capital allocation Balance sheet flexibility supports growth Total ordinary dividends increased 11% to 30.0p per share

37 Q&A 37

38 Appendix 38

39 INVESTMENT IN NEW FUNDS ICG operating model 39 INVESTING Fund deployment Fund performance and track record FUNDRAISING Gross fundraising to average 6.0bn on a 3 year rolling basis Maintain fee level Selective product expansion IC PROFITABILITY IC gross return on assets Manage risk across all portfolios FMC PROFITABILITY FMC operating margin above 43% Manage risk across all portfolios CAPITAL ALLOCATION Return on equity above 13% Gearing x BUSINESS GROWTH Reinvest to drive returns Optimise co-investment ratio for each strategy SHAREHOLDER RETURNS Dividend policy targets paying out 80%-100% of FMC post tax profits Return surplus cash

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